Kabul, 24 November 2021 (TDI): The office of the United Nations Development Program in Afghanistan; released a report on the Banking situation in the country, on 22 November.  Abdallah Al Dardari, the representative of the UNDP in Afghanistan, released a statement.

Dardari stressed the importance of banking to solve the situation in Afghanistan. In the report, the UNDP stated that the situation of the financial systems is disastrous. The report covers the financial systems state from 15 August to the current situation.

UNDP’s report describes a paralyzed system, and also with humanitarian aid thwarted by the liquidity crisis of the country. The crisis of the system is also deepened by the lack of confidence from depositors and the markets.


The report then cited IMF statistics, because the IMF predicts a contraction of around 30% in the Afghan economy for the period 2021-2022. Then the report stressed the need for decisive action to avoid the collapse of the banking system.

The report also stressed the need for actions due to the cost that represents the collapse of the banking system. According to the report, banking deposits fell from 2.9 billion dollars in 2020 to 2 billion in September 2021.

By the end of 2021, the IMF expects another decrease in the deposits to 1.8 billion dollars. This represents a loss of 40%. On the other side, the non-performing loans in the small credit market increased from 30% at the end of 2020 to 57% in September.


Al Dardari noted that the collapse of the financial system exacerbates diminishing economic activity. He then added that banking is one of the most important ties of Afghanistan to the world.

Al Dardari stated the importance of the banking and financial systems, to have a humanitarian solution for the situation. Without the banking system, according to Al Dardari, means the isolation of the citizens.

UNDP recommendations 

UNDP’s report makes several recommendations, actions to be taken for this. Among those actions, the report includes the deposit insurance for depositors, and to be able to ensure adequate liquidity to meet the needs. Also, those actions include credit guarantees, loan repayment delay options for the economy.

Another recommendation of the report is to coordinate with International Financial Institutions. The UNDP considers this to be important because the Institutions have extensive knowledge of the Afghan financial system.

Then the report remarked that the Troika message acknowledged the concerns of humanitarian actors regarding Afghanistan’s liquidity challenges. The UNDP then mentioned that it is necessary to protect to a degree some commercial banking systems.

The reason for that protection is to be able to continue the humanitarian programs, supported by the UN, NGO’s and also bilateral partners. The report warned that the longer the delay in the restoration of those systems, it means that the recovery period will also be longer.


Before August 15, 2021, Afghanistan financial legislation had three foundations. The first one was the Da Afghanistan Bank Law of 2003. The second one was the Afghanistan Banking Law in 2015. The third one was the Regulation for Conversion of a Conventional Bank into an Islamic Bank in 2018.

According to the report,  in 2004, Afghanistan Banks Association was founded, to satisfy the growing demands of the sector. The ABA was a unified body that represented the 12 banks. Then the report remarked that at the end of 2020, the total assets of GDP ratio was approximately 22%.

Afghanistan had 12 banks, six of those were private commercial banks, one private Islamic bank, three banks belonged to the state, and two foreign branches. The report mentioned that the majority of branches are in Kabul, Herat, and Mazar-e-Sharif.

Then the report remarked that the banking system was dollarized and that 60% of deposits were made in foreign currencies. The IMF recommended in June to highlight two major concerns. The first one was the procedures for bank resolution. The second one was regarding the deposit insurance mechanism.


The report then mentioned the current situation following the Taliban takeover. Since the takeover, the international community froze the assets of the central bank of Afghanistan. The situation suspended many operations like international settlements, grant transfers, and also liquidity to print the national currency.

Regarding the credit markets, there has been international support to Afghanistan to develop credit facilities for micro, small and medium businesses. Finally, due to the crisis, the banks were unable to continue extending credits.

Added to the probable collapse of the banking system, the citizens face acute food insecurity. The UN and its different branches have warned that Afghanistan potentially represents if it’s not already, the worst humanitarian crisis the world has ever seen.